FACTOR ANALYSIS

FACTOR ANALYSIS
• A data reduction technique designed to represent
a wide range of attributes on a smaller number of
dimensions.

DEFINITION
“ A statistical approach that can be used to analyze
interrelationship among a large number of
variables and a explain these variables in terms of
their common underlying dimension(factor)”
 What is factor analysis ?
 Factor analysis is a general name denoting a class of
Procedures primarily used for data reduction and
summarization.

 Variables are not classified as either dependent or

independent. Instead, the whole set of interdependent
relationships among variables is examined in order to
define a set of common dimensions called Factors.
 Purpose of Factor Analysis
 To identify underlying dimensions called Factors, that explain
the correlations among a set of variables.
-- lifestyle statements may be used to measure the
psychographic profile of consumers.

 To identify a new, smaller set of uncorrelated variables to

replace the original set of correlated variables for subsequent
analysis such as Regression or Discriminant Analysis.
-- psychographic factors may be used as independent
variables to explain the difference between loyal and
non loyal customers.
 Types of FA

• Exploratory FA
– Summarizing data by grouping correlated
variables
– Investigating sets of measured variables related
to theoretical constructs
– Usually done near the onset of research
 Types of FA
• Confirmatory FA
– More advanced technique
– When factor structure is known or at least
theorized
– Testing generalization of factor structure to new
data, etc.
 Assumptions
 Models are usually based on linear relationships

 Models assume that the data collected are interval scaled

 Multicollinearity in the data is desirable because the objective is to

identify interrelated set of variables.

 The data should be amenable for factor analysis. It should not be

such that a variable is only correlated with itself and no correlation
exists with any other variables. This is like an Identity Matrix.
Factor analysis cannot be done on such data.
 SAMPLE SIZE
• Minimum numbers of variable for FA is 5 cases
per variable
• e.g. 20 variables should have>100 cases(1:5)

IDEAL CONDITION
 A few examples

We can now take few examples

with hypothetical data and run
factor analysis using SPSS package.
How to RuN on spss